WaPo publishes Hudson call for Debt Jubilee as Only Way to Avoid a
Depression
Newsletter published on March 23, 2020
(1) WaPo publishes Hudson call for Debt Jubilee as Only Way to Avoid a
Depression
(2) Fed helicopter has to go to the people, not Wall St - Ellen Brown
(3) Democrat Betrayals will lead to insurrection and demand for
nationalization of banker assets
This is the first time, as far as I know, that the WaPo has published an
article by renegade economist Michael Hudson
(1) WaPo publishes Hudson call for Debt Jubilee as Only Way to Avoid a
Depression
Hudson: A Debt Jubilee is the Only Way to Avoid a Depression;
coronavirus outbreak mind-expansion exercise, making hitherto
unthinkable solutions thinkable
From: chris lancenet <chrislancenet@gmail.com>
A debt jubilee is the only way to avoid a depression
By Michael Hudson
March 22, 2020 at 7:18 a.m. GMT+10
Michael Hudson, author of "… and forgive them their debts" and "Killing
the Host," is president of the Institute for the Study of Long-Term
Economic Trends and is distinguished research professor of economics at
the University of Missouri at Kansas City.
Even before the novel coronavirus appeared, many American families were
falling behind on student loans, auto loans, credit cards and other
payments. America’s debt overhead was pricing its labor and industry out
of world markets. A debt crisis was inevitable eventually, but covid-19
has made it immediate.
Massive social distancing, with its accompanying job losses, stock dives
and huge bailouts to corporations, raises the threat of a depression.
But it doesn’t have to be this way. History offers us another
alternative in such situations: a debt jubilee. This slate-cleaning,
balance-restoring step recognizes the fundamental truth that when debts
grow too large to be paid without reducing debtors to poverty, the way
to hold society together and restore balance is simply to cancel the bad
debts.
The word "Jubilee" comes from the Hebrew word for "trumpet" — yobel. In
Mosaic Law, it was blown every 50 years to signal the Year of the Lord,
in which personal debts were to be canceled. The alternative, the
prophet Isaiah warned, was for smallholders to forfeit their lands to
creditors: "Woe to you who add house to house and join field to field
till no space is left and you live alone in the land." When Jesus
delivered his first sermon, the Gospel of Luke describes him as
unrolling the scroll of Isaiah and announcing that he had come to
proclaim the Year of the Lord, the Jubilee Year.
Until recently, historians doubted that a debt jubilee would have been
possible in practice, or that such proclamations could have been
enforced. But Assyriologists have found that from the beginning of
recorded history in the Near East, it was normal for new rulers to
proclaim a debt amnesty upon taking the throne. Instead of blowing a
trumpet, the ruler "raised the sacred torch" to signal the amnesty.
It is now understood that these rulers were not being utopian or
idealistic in forgiving debts. The alternative would have been for
debtors to fall into bondage. Kingdoms would have lost their labor
force, since so many would be working off debts to their creditors. Many
debtors would have run away (much as Greeks emigrated en masse after
their recent debt crisis), and communities would have been prone to
attack from without.
The parallels to the current moment are notable. The U.S. economy has
polarized sharply since the 2008 crash. For far too many, their debts
leave little income available for consumer spending or spending in the
national interest. In a crashing economy, any demand that newly massive
debts be paid to a financial class that has already absorbed most of the
wealth gained since 2008 will only split our society further.
This has happened before in recent history — after World War I, the
burden of war debts and reparations bankrupted Germany, contributing to
the global financial collapse of 1929-1931. Most of Germany was
insolvent, and its politics polarized between the Nazis and communists.
We all know how that ended.
America’s 2008 bank crash offered a great opportunity to write down the
often fraudulent junk mortgages that burdened many lower-income
families, especially minorities. But this was not done, and millions of
American families were evicted. The way to restore normalcy today is a
debt write-down. The debts in deepest arrears and most likely to default
are student debts, medical debts, general consumer debts and purely
speculative debts. They block spending on goods and services, shrinking
the "real" economy. A write-down would be pragmatic, not merely moral
sympathy with the less affluent.
In fact, it could create what the Germans called an "Economic Miracle" —
their own modern debt jubilee in 1948, the currency reform administered
by the Allied Powers. When the Deutsche Mark was introduced, replacing
the Reichsmark, 90 percent of government and private debt was wiped out.
Germany emerged as an almost debt-free country, with low costs of
production that jump-started its modern economy.
Critics warn of a creditor collapse and ruinous costs to government. But
if the U.S. government can finance $4.5 trillion in quantitative easing,
it can absorb the cost of forgoing student and other debt. And for
private lenders, only bad loans need be wiped out. Much of what would be
written off are accruals, late charges and penalties on loans gone bad.
It actually subsidizes bad lending to leave them in place.
In the past, the politically powerful financial sector has blocked a
write-down. Until now, the basic ethic of most of us has been that debts
must be repaid. But it is time to recognize that most debts now cannot
be paid — through no real fault of the debtors in the face of today’s
economic disaster.
The coronavirus outbreak is serving as a mind-expansion exercise, making
hitherto unthinkable solutions thinkable. Debts that can’t be paid won’t
be. A debt jubilee may be the best way out.
Michael Hudson: A Debt Jubilee is the Only Way to Avoid a Depression
Posted on March 22, 2020 by Jerri-Lynn Scofield
(2) Fed helicopter has to go to the people, not Wall St - Ellen Brown
Socialism at Its Finest after Fed’s Bazooka Fails
Posted on March 21, 2020 by Ellen Brown
In what is being called the worst financial crisis since 1929, the US
stock market has lost a third of its value in the space of a month,
wiping out all of its gains of the last three years. When the Federal
Reserve tried to ride to the rescue, it only succeeded in making matters
worse. The government then pulled out all the stops. To our staunchly
capitalist leaders, socialism is suddenly looking good.
The financial crisis began in late February, when the World Health
Organization announced that it was time to prepare for a global
pandemic. The Russia-Saudi oil price war added fuel to the flames,
causing all three Wall Street indices to fall more than 7 percent on
March 9. It was called Black Monday, the worst drop since the Great
Recession in 2008; but it would get worse.
On March 12, the Fed announced new capital injections totaling an
unprecedented $1.5 trillion in the repo market, where banks now borrow
to stay afloat. The market responded by driving stocks 8% lower.
On Sunday, March 15, the Fed emptied its bazooka by lowering the fed
funds rate nearly to zero and announcing that it would be purchasing
$700 billion in assets, including federal securities of all maturities,
restarting its quantitative easing program. It also eliminated bank
reserve requirements and slashed Interest on Excess Reserves (the
interest it pays to banks for parking their cash at the Fed) to 0.10%.
The result was to cause the stock market to open on Monday nearly 10%
lower. Rather than projecting confidence, the Fed’s measures were
generating panic.
As financial analyst George Gammon observes, the Fed’s massive $1.5
trillion in expanded repo operations had few takers. Why? He says the
shortage in the repo market was not in "liquidity" (money available to
lend) but in "pristine collateral" (the securities that must be put up
for the loans). Pristine collateral consists mainly of short-term
Treasury bills. The Fed can inject as much liquidity as it likes, but it
cannot create T-bills, something only the Treasury can do. That means
the government (which is already $23 trillion in debt) must add yet more
debt to its balance sheet in order to rescue the repo market that now
funds the banks.
The Fed’s tools alone are obviously incapable of stemming the
bloodletting from the forced shutdown of businesses across the country.
Fed chair Jerome Powell admitted as much at his March 15 press
conference, stating, "[W]e don’t have the tools to reach individuals and
particularly small businesses and other businesses and people who may be
out of work …. We do think fiscal response is critical." "Fiscal policy"
means the administration and Congress must step up to the plate.
What about using the Fed’s "nuclear option" – a "helicopter drop" of
money to support people directly? A March 16 article in Axios quoted
former Fed senior economist Claudia Sahm:
The political ramifications of the Fed essentially printing money and
giving it to people – there are ways to do it, but the problem is if the
Fed does this and Congress still has not passed anything … that would
mean the Fed has stepped in and done something that Congress didn’t want
to do. If they did helicopter money without congressional approval,
Congress could, and rightly so, end the Fed.
The government must act first, before the Fed can use its money-printing
machine to benefit the people and the economy directly.
The Fed, Congress and the Administration Need to Work as a Team
On March 13, President Trump did act, declaring a national emergency
that opened access to as much as $50 billion "for states and territories
and localities in our shared fight against this disease." The Dow Jones
Industrial Average responded by ending the day up nearly 2,000 points,
or 9.4 percent.
The same day, Democratic presidential candidate Rep. Tulsi Gabbard
proposed a universal basic income of $1,000 per month for every American
for the duration of the crisis. She said, "Too much attention has been
focused here in Washington on bailing out Wall Street banks and
corporate industries as people are making the same old tired argument of
how trickle-down economics will eventually help the American people."
Meanwhile the American taxpayer "gets left holding the bag, struggling
and getting no help during a time of crisis." H.R. 897, her bill for an
emergency UBI, she said was the most simple, direct form of assistance
to help weather the storm.
Democratic presidential candidate Andrew Yang, who made a universal
basic income the basis of his platform, would go further and continue
the monthly payments after the coronavirus threat was over.
CNBC financial analyst Jim Cramer also had expansive ideas. He said on
March 12:
How about a $500 billion Treasury issue … [at] almost no interest cost,
to make sure that when people are sick they don’t have to go to work,
and companies that are in trouble because of that can still make their
payroll. How about a credit line backstopped by … the Federal Reserve. I
know the Federal Reserve is going to say they can’t do that, Congress is
going to say they can’t do that, everyone is going to say what they said
in 2007, they can’t do that, they can’t do that — until they did it. …
[W]e heard all that in 2007 and they ended up doing everything.
And that looks like what will happen this time around. On March 18, as
the stock market continued to plummet, the administration released an
outline for a $1 trillion stimulus bill, including $500 billion in
direct payments to Americans, along with bailouts and loans for the
airline industry, small businesses, and other "critical" sectors of the
U.S. economy.
But the details needed to be hammered out, and even that whopping
package buoyed the markets only briefly. In the bond market, yields shot
up and values went down, on fears that the flood of government bonds
needed to finance this giant stimulus would cause bond values to plummet
and the government’s funding costs to shoot up.
Extraordinary Measures for Extraordinary Times
There is a way around that problem. To avoid driving the federal debt
into the stratosphere, the Treasury could borrow directly from the
central bank interest-free, with an agreement that the debt would remain
on the Fed’s books indefinitely. That approach has been tested in Japan,
where it has not generated price inflation as austerity hawks have
insisted it would. The Bank of Japan has purchased nearly 50 percent of
the government’s debt, yet consumer price inflation remains below the
BOJ’s 2 percent target.
Virtually all money today is simply "monetized" debt – debt turned by
banks into something that can be spent in the marketplace – and the
ultimate backstop for this sleight of hand is the central bank and the
government, which means the taxpayers. To equalize our very unequal
system, the central bank and the government need to work together. The
Fed needs to be "de-privatized" – turned into a public utility that
serves the taxpayers and the economy. As Eric Striker observed in The
Unz Review on March 13:
The US government’s lack of direct control over the nation’s central
bank and the plutocratic nature of our weak state means that common
sense solutions are off the table. Why doesn’t the state buy up majority
shares in large corporations (or outright nationalize them, as happened
with the short successful experiment with General Motors in 2009) and
use the $1.5 trillion at low interest to develop American industrial
independence?
Interestingly, that too could be on the table in these extraordinary
times. Bloomberg reported on March 19 that Larry Kudlow, the White
House’s top economic adviser, says the administration may ask for an
equity stake (an ownership interest) in corporations that want
coronavirus aid from taxpayers. Kudlow noted that when this was done
with General Motors in 2008, it turned out to be a good deal for the
federal government.
While traditionally considered "anti-capitalist," the government taking
an ownership interest in bailed out companies may be the only way the
proposed bailouts will get approval. There is little sentiment today for
the sort of no-strings-attached "socialism for the rich" that the
taxpayers shouldered in 2008 without reaping the benefits. Bloomberg
quotes Jeffrey Gundlach, chief executive officer at DoubleLine Capital:
I don’t think government bailouts of over-leveraged companies that got
over-leveraged by share buybacks at all-time highs, enriching executives
and hedge fund investors, will sit well with the American people.
The Bloomberg article concludes with a quote from another chief
investment officer, Chris Zaccarelli of Independent Advisor Alliance:
I like how [the administration is] thinking a little bit outside of the
box. Something big and bold like that could potentially be what turns
the market around ….
Long-term Solutions
Rather than just a stake in the profits, the government could think a
bit further outside the box and turn insolvent airlines, oil companies,
and banks into public utilities. It could require them to serve the
people and the economy rather than just maximizing the short-term
profits of their shareholders.
Concerning the banks, the Fed could do as the People’s Bank of China is
doing in this crisis. The state-run PBoC is giving regional banks $79
billion in stimulus money, but it is on condition that they lend it to
small and medium enterprises and forgive late payments, so that economic
damage is reversed and production can recover quickly.
Another model worth studying is that of Germany, which also has a strong
public banking system. As part of a package for coronavirus aid that the
German finance minister calls its "big bazooka," the government is
offering immediate access to loans up to €500,000 for small businesses
through its public bank, the KfW (Kreditanstalt fuer Wiederaufbau),
administered through the publicly-owned Sparkassen and other local
banks. The loans are being made available at an interest rate as low as
1%, with interest only for the first two years.
Contrast that to the aid package President Trump announced last week,
which will authorize the Small Business Administration to offer business
loans. After a lengthy process of approval by state authorities, the
loans can be obtained at an interest rate of 3.75% – nearly 4 times the
KfW rate. German and Chinese public banks are able to offer rock-bottom
interest rates because they have cut out private middlemen and are not
driven by the insatiable demand for shareholder profits. They can lend
countercyclically to avoid booms and busts while supporting the economy
as a whole.
The U.S., too, could create a network of publicly-owned banks backed by
the central bank, which could lend into their communities at
below-market rates. And this is the time to do it. Times of crisis are
when change happens. When the Covid-19 scare has passed, we will have a
different government, a different economy and a different financial
system. We need to make sure that what we get is an upgrade that works
for everyone.
(3) Democrat Betrayals will lead to insurrection and demand for
nationalization of banker assets
Rage and Bloodshed Ahead: Democrat Betrayals and the Coming National
Labor Movement
Joaquin Flores
March 19, 2020 Future historians employed in institutions not yet
founded, or perhaps in lands far from here, will no doubt record that it
was the flagrant betrayals of the Democrat Party against its own working
class base that led to the festival of violence that characterized the
implosion now threatening the United States. Its origins though complex,
are not complicated. Will this inevitable and bloody social violence
serve as the mid-wife for a truly justice-based system?
There will be a new militant labor movement on the rise, but it will be
born from bloodshed and social violence. It will make the 1930’s look
like a walk in the park and it will have nothing to do with the Democrat
Party. It will be led by men and women with nothing left to lose, and it
will bring together a united front of fighters and movements which today
merely have the appearance of ideological disparity. We are on the edge
of a new paradigm beyond left and right.
This is probably tomorrow’s most important story – one we can start
telling today
How the DNC constructed and coerced the candidacy of Bernie Sanders was
only the final chapter along a whole history of betrayals. Sanders’
candidacy could not succeed on the course it forged, and is certain to
finally collapse this week. His attempt at a fireside chat was poorly
executed, poor aesthetics against a cold white wall, and rambling answers.
His pledge to support Joe Biden is only further evidence of Bernie’s
compromised candidacy, yet the movement behind Bernie isn’t his, just as
the movement behind Trump isn’t his either.
At the end of 2015 this author accurately predicted exactly why Trump
would win a year later, while America’s left was certain that despite
the problems of Clinton as a candidate, she would prevail. Here we will
use that methodology to explain why today, with the betrayals of the
DNC, all that lies ahead is – to put it frankly – bloodshed in the
streets. While we engage with the present news cycle, what’s presented
will remain relevant for years ahead.
The foundations of these brother populist movements of the hard-left and
alt-light (populist right) will necessarily coalesce into the coming
extra-electoral struggle, an extra-legal conflict, and will be
predominated by its nationalist and socialist characteristics. To do
this is to understand how secessionist and militia movements, veterans
groups, and organized labor will solidify together.
Contrary to the speculation of some, the betrayal of Sanders of which
Sanders himself took an active role, will not lead to a demoralization
among the base of the Democrat Party who overwhelmingly support Sanders.
The base supports not Sanders in particular, but supports just two
things – his platform and his credibility. This is the truth of the
matter despite misinformation in the press accompanied by electoral
fraud on the part of the party itself, which has attempted to simulate
support for Biden.
Likewise with Trump, whose base required of him an entire
re-organization of America’s relationship to the global economy to
produce meaningful work and the foundation for hope, they too will
believe that no change can come from the electoral process. On the
roundabout course of this realization they will quickly encounter the
betrayed base of Democrats which had discovered the same.
Sanders and Trump are losing support as their personal credibility
deteriorates. This doesn’t mean that folks are simply going to go home.
Instead, they are going to go big.
Rather than demoralization in the sense of a resigned complacency, this
dynamic will transform into something far more radical than ever seen
before in the history of the United States. Complacency is a luxury for
those for whom things can still get worse. The median balance in the
bank of Americans is a meagre $2,900, but it’s worse: about 65% of
Americans don’t have $500 to their name.
The luxury of complacency is a relic of bygone days. The US is no longer
a powerful empire with a national oligarchy, rather its elites today are
entirely transnational very much like semi-nomadic bankers have always
been, as they have been for over a thousand years, as explained in the
rich, detailed, documented history of Europe – a history where these
bankers and usurers were kicked out of European states hundreds of
times. If this or that society collapses as a result of these parasites
finally killing the host, the parasites simply move on. That is why the
nationalization of banker assets will be among the most prominent
demands of the coming American insurrection. It will be chief among the
demands of America’s coming social nationalist labor movement.
For millions of Americans, these are times of despair. And despair leads
to radicalization where whole social movements are born.
This is not a time characterized by the kind of complacency that the
baby boomer generation could, for their part, afford. These are not
times characterized by some sense of middle-class charity towards the
‘down-trodden’ minority that fell through the cracks. These are times
where most American people are themselves the down-trodden. The coming
American labor movement is not based on lofty policy ideals and charity,
but on life or death questions of survival for the majority.
How did we arrive at this impasse?
Such a question requires a thorough answer incompatible with a brief of
this type. But we can summarize at the cost of generalizing. We can go
back to the 1940’s – labor was weakened by legislation passed during the
Truman administration known as the Taft-Hartley Act, betraying the
efforts of labor backed by FDR. Think-tanks and institutes from elite
universities and funded by deep-pocketed lobbyists under the moniker of
‘philanthropy’, instilled a culture of liberalism not meant to empower
people but to placate them. Of course some degree of empowerment could
have also placated the teeming masses, but the sociopathology of the
oligarchy was such that even this was intolerable.
What was the result? The Democrat Party, backed by the ruling class,
infiltrated organized labor with the aim of derailing it. But the
post-war prosperity (read empire) mitigated the gradual decline of labor.
Then in the 1970’s, there was a failure to institute a UBI during the
Nixon years despite it being championed by libertarian economist Milton
Friedman. Martin Luther King Jr. had also expounded on its necessity in
the decade prior. This was to be a trade-off to the exportation of
manufacturing work to the Orient and Latin America, as well as a
necessary component of economic justice and growth. This could have been
a reasonable component to the otherwise ridiculously revised terms of
the fractional-reserve banking system as the US abandoned a currency
backed by precious metals.
As a consequence, the desired outcome forced upon the people by the
bankers then ‘required’ the use of credit lines for the boomer
generation to stimulate the same level of consumption that UBI would
have. But unlike UBI, this came with the inflation and psychological
slavery which results from profit-driven credit systems – where interest
rates produce an upwards redistribution of the people’s earned wealth,
into the hands of the oligarchy. That credit ride didn’t last long
before bubble after bubble was created only to burst. Each round of
‘bursting’ led to the further upwards redistribution of wealth. The
wealthy never saw better days than when the economy was ‘weak’. Home
foreclosures only meant asset forfeiture; whatever was paid on a
mortgage simply lined their pockets. They were then free to sell the
same homes at full-pop.
Did no one see that the upwards redistribution of wealth was one of the
leading causes of inflation?
Unemployment was redefined, the profit driven economy was compelled by a
misanthropic idea that 4% unemployment rates were optimal. That 4% was
much closer to 10%, even 15% in reality – hidden by the new definitions
being used by the priestly caste known as the economists of the Reagan
years, and forever after. This forced people to continue to work under
any conditions imposed, out of fear of foreclosure, out of fear for
losing health insurance. A free people do not work out of fear in times
of peace.
The theory and practice of the permanent war which transcended the Cold
War and into the never-ending ‘war on terror’ was characterized by a
race to the bottom where the labor market was intervened upon by big
government to act on behalf of the robber barons of industry and the
cosmopolitan bankers.
Thinking that through a little more – maintaining a 4% and up
unemployment rate meant slowing down job-creating economic growth for
the sake of increased profit margins. This is contrary to the oligarch’s
professed canon that more ‘liquidity’ in the hands of the few meant more
possibilities to invest. Interest rates were managed precisely to stunt
economic growth for the sake of quarterly economic performance. Only a
social-national approach to a fully mobilized and employed people could
have created the personal and family wealth to complete the
production-consumption cycle.
The end of gold and silver backing the currency, and the dominance of
the petro-dollar and the fiat system, paralleled the demise of organized
labor. Social managers have been brilliant in their ability to divide
and conquer; those aware of the currency reality were also led to
believe that ‘socialist labor’ was also to blame. The opposite was true
– capital was to blame.
These are just some of the critical moments that led to the present
crisis. This crisis is irreversible. Maybe Trump could have been
something of a new FDR, but the contradictions of the terrain and the
coalition of billionaire oligarchs he forged made this impossible. His
ideological outlook was also at odds with understanding all the features
of the present moment, despite his unique brilliance and prescience over
a score of other matters, even if related. Trump still adheres to the
disproven ‘trickle-down’ economics of Thatcher and Reagan. Sanders also
perhaps could have been a new FDR – if he wasn’t dead set against his
own electoral victory. Sanders lacks confidence and fortitude – two
necessary features of a winning leader. Roosevelt, despite being from a
moneyed family of tobacco and aluminum, had a formative educational
experience under the influence of the great Social Gospel mentor,
Endicott Peabody.
The take-away
Trump will probably win a second term, but it will be one so compromised
by the oligarchy on the domestic front that his radicalized populist
base will never see the economic promises of an employment-based economy
realized. His foreign policy of renegotiating trade to jump-start
domestic production, while avoiding the geopolitical tinderbox of
unipolarity inherited by the neoliberal Democrats and neoconservative
Republicans, will continue to be frustrated by threats of impeachment
under bogus charges.
You see, in the America story there was this dangerous myth that it
would all work out in the end. The historically established fact of the
life cycles of civilizations was never entertained. Toynbee was
apparently just a wrongheaded doomer who didn’t understand the
permanence guaranteed by American exceptionalism.
We can see where this impasse must lead – and it will be bloody.
The metrics don’t lie: Mass hysteria over a global epidemic, threats of
an economic meltdown, open and flagrant election fraud. Layer on
millions of Americans who never recovered from 2007 as the banks were
bailed out, not the people who lost their homes. Wages pushed down,
families torn apart, small businesses permanently shuttered. The dignity
of fathers as bread winners obliterated by an identity-politics driven
culture, bent on the demonization of boys and men. Insurance companies
dedicated to fleecing and outright theft. Labor unions controlled by DNC
insiders who collude in the frog-in-boiling water tactics of neo-liberal
austerity.
Make no mistake – there will be blood. But what will come next? How will
the next great movement of the American people respond? Stay tuned –
we’ll address it in the next part of this series.
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